Calzaretta v. Rezny

Filing
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IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
DAVID CALZARETTA,
Plaintiff,
v.
NICHOLAS E. REZNY,
Defendant.
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No. 17 C 2408
Magistrate Judge
Maria Valdez
MEMORANDUM OPINION AND ORDER
Plaintiff David Calzaretta brought this complaint against Defendant
Nicholas E. Rezny alleging violations of the Securities Act of 1933, 15 U.S.C. § 77a
et seq.; Illinois Securities Law, 815 Ill. Comp. Stat. § 5/1 et seq.; common law fraud;
unjust enrichment; and conversion, based upon business dealings between the
parties. This matter is now before the Court on Defendant’s Motion to Dismiss for
Lack of Personal Jurisdiction [Doc. No. 18]. For the reasons that follow, the motion
is denied.
BACKGROUND 1
Plaintiff’s complaint alleges that he met Defendant at an entrepreneur forum
group on March 16, 2016 and again on May 3, 2016 in Chicago. Plaintiff is a
resident of Illinois, and Defendant is from Wisconsin. Defendant sent documents to
The following facts from Plaintiff’s complaint are taken as true for purposes of this motion
to dismiss. See Killingsworth v. HSBC Bank, 507 F.3d 614, 618 (7th Cir. 2007).
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Plaintiff on May 16 regarding purchasing securities in the form of property portfolio
shares in the Milwaukee, Wisconsin area. The two met at another entrepreneur
forum in Rosemont, Illinois on June 10, 2016, and on August 8, 2016, Defendant
sent Plaintiff financial information on various properties in the Milwaukee area. On
August 21, 2016, Defendant traveled with his wife to Plaintiff’s Illinois home to
discuss the potential investments with Plaintiff and his wife. Defendant told
Plaintiff that he owned several dozen properties and managed more than 250
others.
The investment discussed at the August 21 meeting related to the purchase
of ten properties in the Milwaukee area that were owned by Riverwest Investments,
LLC. Defendant indicated he would form a new LLC to purchase the properties, and
that LLC would be owned 62% by Plaintiff and 38% by Defendant and his wife. The
price of the 62% ownership interest was to be $150,000.00, and Defendant
guaranteed Plaintiff a 15% return on his investment for at least three years.
Around December 13, 2016, Plaintiff wired Defendant $150,000. Shortly
thereafter, Plaintiff received a call from Defendant’s banker, who told Plaintiff that
Defendant was involved in three lawsuits with investors, that his properties are
overvalued, rent rolls were falsified, and other properties were turned over to other
investors with hundreds of thousands of code violations and less than 15%
occupancy. In light of this phone call, Plaintiff attempted to stop the wire transfer,
but he was not successful. Plaintiff convinced Defendant to return $100,000 of the
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investment, but $50,000 had already been spent. Defendant assured Plaintiff that
the $50,000 would be returned on January 8, 2017, after he closed a different deal.
Defendant’s banker then informed Plaintiff that Defendant had copied
Plaintiff’s signature onto certain documents used to obtain financing for the deal.
Plaintiff also learned that on February 15, 2013, Defendant and his prior business
had been ordered to cease and desist securities transfer activities by the Wisconsin
Department of Financial Institutions Division of Securities.
Defendant has refused to return the remaining $50,000 of Plaintiff’s
investment. Plaintiff alleges that Defendant did not own several dozen properties,
did not manage more than 250 others, and had no intention of buying the
properties. According to the complaint, Defendant sought the $150,000 from him
not to invest but to pay off other lenders to whom he owed money for other
properties.
DISCUSSION
Defendant moves to dismiss the complaint for lack of personal jurisdiction
pursuant to Federal Rule of Civil Procedure 12(b)(2) because he has insufficient
contacts with Illinois. 2 But as Plaintiff points out, the complaint alleges federal
question jurisdiction and contains a claim under the Securities Act. Therefore, its
jurisdictional provisions apply:
Defendant denied the jurisdictional allegations in his answer to the complaint and has
maintained the defense throughout the litigation, thus it has not been waived. See Fed. R.
Civ. P. 12(h)(1).
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Any such suit or action may be brought in the district wherein the
defendant is found or is an inhabitant or transacts business, or in the
district where the offer or sale took place, if the defendant participated
therein, and process in such cases may be served in any other district
of which the defendant is an inhabitant or wherever the defendant
may be found.
15 U.S.C. § 77v.
Defendant’s reply brief plays lip service to the Securities Act’s jurisdictional
provision but then discusses only minimum contacts under Illinois state law.
However, when there is statutory authorization for nationwide service of process,
reference to state law long-arm jurisdiction is “inappropriate.” Fitzsimmons v.
Barton, 589 F.2d 330, 332 (7th Cir. 1979). The Securities Act “confers personal
jurisdiction in federal court over defendants with minimum contacts with the
United States, as long as the mandates of constitutional due process are met.’”
Zurich Capital Markets, Inc. v. Coglianese, 388 F. Supp. 2d 847, 857 (N.D. Ill. 2004)
(quoting Lisak v. Mercantile Bancorp, Inc., 834 F.2d 668, 671 (7th Cir. 1987))
(emphasis in original) (discussing the analogous jurisdictional provision in the
Securities Exchange Act); see Fitzsimmons, 589 F.2d at 332 (“[T]he only question
before us is whether the Due Process Clause imposes any restraints on this
nationwide service.”); Schaufenbuel v. InvestForClosures Fin., L.L.C., No. 09 C
1221, 2009 WL 3188222, at *2 (N.D. Ill. Sept. 30, 2009) (“[W]here a statute
authorizes nationwide service of process and a defendant resides within the
territorial boundaries of the United States the government’s exercise of power over
them in any of its courts is justified.”); see also Fed. R. Civ. P. 4(k)(1)(C) (“Serving a
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summons or filing a waiver of service establishes personal jurisdiction over a
defendant . . . when authorized by a federal statute.”).
The Seventh Circuit has held that in the context of nationwide service, the
fairness standard discussed in Shaffer v. Heitner, 433 U.S. 186 (1977), “relates to
the fairness of the exercise of power by a particular sovereign, not the fairness of
imposing the burdens of litigating in a distant forum.” Fitzsimmons, 589 F.2d at
333. “Here the sovereign is the United States, and there can be no question but that
the defendant, a resident citizen of the United States, has sufficient contacts with
the United States to support the fairness of the exercise of jurisdiction over him by
a United States court.” Id.; see also Lisak, 834 F.2d at 671 (“[T]here is no
constitutional obstacle to nationwide service of process in the federal courts in
federal-question cases.”). Furthermore, because the Securities Act claim confers
personal jurisdiction, jurisdiction also exists over Plaintiff’s state law claims. See
Robinson Eng’g Co. Pension Plan & Tr. v. George, 223 F.3d 445, 449 (7th Cir. 2000)
(explaining that a federal court may “entertain pendent state law claims where
federal claims provided for extraterritorial service”).
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CONCLUSION
For the foregoing reasons, Defendant’s Motion to Dismiss for Lack of
Personal Jurisdiction [Doc. No. 18] is denied.
SO ORDERED.
ENTERED:
DATE:
___________________________
HON. MARIA VALDEZ
United States Magistrate Judge
December 6, 2017
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